Saturday Cup of Joe: a lending and techish newsletter

Friends & Colleagues:

Coming to you from Port Matilda, Pennsylvania. I’m halfway between our old house (Canton, CT) and our new home (Detroit, MI). It’s all happening…next week’s 10th edition will come to you from a fully settled apartment in Detroit. Until then:

Of Interest: There was a lot of talk this week about FHFAs announcement that it is working toward a common securitization platform for Fannie Mae and Freddie Mac and a single security. This comes on the heels of several actions taken by FHFA to move forward on a variety of issues. Not all have been met without some skepticism. But by and large, FHFA is moving and things are happening. This week a detailed look at a Common Securization Platform identified a plausible schedule that would see a single GSE security sometime in 2018. In short, the single security is a joint initiative to develop a single mortgage-backed security that will be issued by the GSEs to finance fixed-rate mortgage loans on single family homes.

When I first began to study this issue, the most promising proposal was one put forward in the Senate called the Corker-Warner plan. Corker-Warner also proposed a CSP though took a slightly different approach on the level of risk sharing and who could participate at what levels. MBA, generally and in this specific issue, supports an even playing field among lender/originators of all shapes and sizes.

What caught my attention, this week, was the both Senators Corker and Warner being talked about as possible Veep selections. Potentially squaring off against each other if it had come to pass. Not so. On one hand, Warner seems lower on the list behind even the junior Senator from Virginia, Tim Kaine, but on the list nonetheless. On the other, Senator Corker outright declined consideration. Interestingly enough, he favored Ivanka Trump in a historic father-daughter ticket.

The Takeaway: Let’s all spend the next news cycle proposing what a Trump/Trump ticket would look like. Seriously, though, FHFA is moving on a way forward for Fannie and Freddie. Cautious as it is, these are the moments when small items are getting decided that we look back on in a few years as turning points. At the time, it seems more like a minor step, but once made, it becomes taken for granted quickly and then new innovation ideas are less likely to be considered since “we already have a CSP, might as well just keep going.” This is not a unique decision-making process to FHFA. It is a real risk in all our organizations. I like to draw analogies or draw lessons from many different sources. Podcaster Adam Carolla once said on his show that he’s learned if he walks past or steps over something, like a piece of mail, a box or clutter in his house more than 3 times without moving it then that’s where it is ultimately staying…whatever it is and wherever it happens to be at that moment. We’ve all experienced that. What FHFA is doing here is the process equivalent. Once this small step is in place, it naturally limits the possible options going forward. Future options will be evaluated in the context of whatever the current state is when Congress gets around to looking at this more seriously. So, now is the time to influence FHFA and perhaps influence the future state of the GSEs. We all know that MBA, as usual, is all over this issue.

Have you heard?: Anything about the new 1003? Me neither. Over the last few weeks, several trade associations have been petitioning FHFA, CFPB and Congress to forego the “language preference” question on the new 1003. There is wide support and agreement among banks, lenders, credit unions, auto lenders, consumer credit companies and others that this is not the best solution the problem. I haven’t heard any movement recently but the letters, phone calls and meetings picked up steam several weeks ago and a lot is going on behind the scenes in Washington. Stay tuned.

Got Me Thinking: As soon as I read the title of a recent NYT article, I knew I’d love it and suspected it would fit nicely in an upcoming Saturday Cup of Joe. I couldn’t help but include it in the Got Me Thinking section as that’s exactly what the article implores of managers and leaders. According to the article, managers and bosses are increasingly seeking employees with curiosity and question-asking ability. An idea that is questioned is stronger because of the question. I think we’d all agree there. What’s more the ever-changing landscape of today’s tech and business world create incentives to “keep learning and anticipate what’s next.” Couldn’t agree more.

I did take issue with the idea of “question-asking” seminars or exercises to train the staff to ask better questions. I’ve always assumed that most people want to be inquisitive and want answers to their questions but either are a). too afraid of perceived public ridicule to ask or b). too afraid of the boss to ask. I don’t think a question asking seminar is as important as the right corporate culture that encourages folks to speak up and doesn’t belittle any question as long as it’s asked. Prepare the field and your team will sow the seeds.

A Look Ahead: It is impossible to look ahead this week, or any week lately (sadly), without thinking about gun violence. Since I am trying to keep this weekly experiment to things lending, tech and leadership, I am not going to attempt to unpack something that implicates significant social justice issues and involves large public policy initiatives. At the same time, there is no mistaking that gun violence and violence involving the police shakes the foundation of our communities. African Americans and urban America, generally, has been living with the threat of violence for years. This specific type of violence. Similarly, our officers know this threat every day that they go to work. They are the heroes of our communities and their families know a fear that only military families and first responder families can appreciate. So there are large scale institutional issues that need to be addressed and specific factual, individual issues that need to be address. The complexity is overwhelming and many business and communities leaders (not to mention citizens) are left wondering what to do. There is a tie-in for companies in the consumer finance and lending industries — strong, safe communities are necessary for stable, confident families and customers.

I thought I would simply mention two lessons I learned at the NYPD that we can apply as food for thought.

I was a law student in the Legal Bureau and my supervisor, Deputy Inspector Sweet, looked at it this way. He said, “I have 22,000 cops out there. If my hiring practices are even 99% accurate, then I have 220 time bombs walking around.” It really put the severity and reality of the situation in context. How many of us can say we’re 99% accurate in our hiring practices? Not to minimize this topic in any way, because I could (and probably should) write about this all day. The second lesson I took away from the NYPD came up in mind this week and I thought it could apply to all of us in one way or another. D.I. Sweet would often say that every NYPD encounter is a deadly situation. Every encounter is a situation with deadly force. Every interaction involves a deadly weapon. As Deputy Inspector Sweet put it, “we bring the gun.” Because the police bring a gun, the NYPD creates the deadly force. They up the ante. Therefore, the level of seriousness must match the responsibility. And obviously they take that responsibility incredibly seriously. The issues that our leaders, our churches, our community groups and our families are wrestling with this week go to the heart of what our country will be. What we want our neighborhoods, all neighborhoods, to be.

For those of us in an industry that trumpets homeownership as the foundation of solid, stable communities, we have a responsibility to help define community and ensure that all Americans have access to the opportunities and protections that we enjoy. Our companies and organizations can be forces for good and stability. Honestly, I think executives and leaders should consider what this generation (and the next) is expecting. I’ve written before that young people believe a company should have values and should stand for something. That is not the way it used to be. For 100 years many (most?) executives believed a company should be “good” but otherwise neutral when it came to controversial social issues outside their industry or customer base. We are trending in the opposite direction. It would be reckless for companies to come out with platforms and “beliefs” on all kinds of issues. At the same time, consumers seem to want companies that stand for something and are not afraid to articulate values when appropriate.

Sidenote: James Morin and I used to often talk about a theory (perhaps it was his theory, but I think he heard it somewhere) that kids make the best salespeople. If you think about your last interaction with a 4 year old, they are persistent, do not take no for an answer, counteroffer with deft and speed, and find a way to make what they want the think you should want as well. Perfect little salespeople.

A few weeks ago, my daughter asked to go swinging at the playground. When we arrived, she was insistent that she be the one to “start” the swing. Though her toes barely touched the ground, she back the swing up as far as she could starting from almost nothing and pumped her way up. The whole time she continued to say, “I’m gonna do it” and “I’m gonna go high.” In that moment it struck me that this was the perfect microcosm of the attitude it takes to be successful, especially as a business leader. A flat out determination that says — I can do this. I’m going to do this. I’m going to go high. For me, it was a small but powerful reminder that determination and confidence (of success) are the distinguishing factors in life.

Today’s Thought: What role patience? This is shorthand phrase that I struggle with all the time. Patience versus prudence. I find one of the hardest tensions in life is when to be patient and when to be aggressive. Understanding that aggressive is not the opposite of patience, but however it plays out for you in your life — aggressive, active, assertive — the point stands. There is a time to be patience and a time to act. The variables involved in each major decision are enough to paralyze even a decisive person if one were to dwell on all the possibilities.

I recently heard an entrepreneur say, “Being first and being wrong feel the same.” What a fascinating thought. All alone in the market can be a great sign or a terrible sign. How do you know? Again, patience comes to mind. It can be a blessing or a curse. Patience when you are first to market builds your brand and your business. Patience when you are wrong only exaggerates the failure (and loss).

Quote: “Far and away the best prize that life offers is the chance to work hard at work worth doing.” — Theodore Roosevelt (1903)

Continued success,

Written by

Thinker, curious leader, once an attorney…always trying to answer well.

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